Tuesday, November 17, 2009

Be Careful What (Change of Law) You Ask For; You Might NOT Get It: Atlantic Yards and 1967's Rejected NYS Constitutional Amendment

In the years we spent as a lawyer in government we drafted and supervised the drafting and proposal of a substantial volume of legislation. A respectable amount of it passed. Some of it didn’t. That’s what brings us to the point where we will begin a discussion addressing why eminent domain cannot be used for Forest City Ratner’s proposed Atlantic Yards.

The first rule of proposing a change to the law, by passage of legislation or otherwise, is to consider if you really need the change or whether it is possible to construe the law as already saying what you want it to. Why? Because if you propose a change in law and fail that failure will forever afterwards stand as evidence you CAN’T then interpret the law as already saying what you want it to. This is for two reasons. First, proposing a change in law puts on the record the evidence that everyone and most particularly the legal experts on the subject, believe that the law DOESN’T already say what you are asking it to be changed to say, and second, when the proposed change in law doesn’t pass it shows that those who voted it down (those with authority and from whom the law flows) are opposed to modification of the law to make it say what you proposed.

In 1967 New York State Voters Rejected Eminent Domain for “Economic Development”

All this is relevant because in 1967 New York State voters voted against a “public use” amendment to the New York State constitution proposed for the purpose of permitting the use of eminent domain for “economic development.” Even though that amendment was rejected state agencies officials are attempting to use eminent domain in exactly that way at the proposed Atlantic Yards megadevelopment site.

Gelinas’s Wall Street Journal Op-ed Summary of Arguments

The other day Nicole Gelinas of the Manhattan Institute explained this very nicely in a an op-ed for the Wall Street Journal: The Empire State and Eminent Domain, November 14, 2009. Though her arguments reflect those of lawyer Matt Brinkerhoff in DDDB’s petition now before the state’s highest court in the Goldstien v. Pataki eminent domain appeal we were impressed with the way Ms. Gelinas’s boiled them down to simple op-ed directness:

1. The New York State Constitution did not permit eminent domain taking for “economic development.”

2. In 1967 New York voters rejected an attempt to change the Constitution so that eminent domain could be used for “economic development.”

3. In the face of such rejection New York State officials, wanting to do the Atlantic Yards “economic development” project, have attempted to redefine “blight” as “underdevelopment,” thus circumventing the voters’ rejection of eminent domain for “economic development.” (Under prescribed circumstances, the state Constitution permits the use of eminent domain to remove blight.) Addressing herself to the AKRF report by virtue of which the state agencies (pretextually) found the “blight” they needed to seize property, Ms. Gelinas writes:

Mainly, however, the report pointed to "underutilization" of the land, concluding that the area wasn't being used to the maximum economic benefit allowed by law. But that means the Atlantic Yards is really an economic-development project—and that the politicians along with Mr. Ratner want to manage Brooklyn's economy rather than let competitive forces continue to improve the neighborhood.

4. We would add to Ms. Gelinas’s points this additional observation offered as a comment extending her point #3 above by Mike McDougal in a discussion of her article on The Volokh Conspiracy (New York: Where “Underutilization” Equals “Blight”). He says that all development can therefore be promoted as ostensible “blight”removal:

That’s exactly right. Another obvious way to put it is this: Every rational for-profit real estate developer is attempting to eliminate “blight.”

Prospect Heights: Not a Slum, Not in Need of Eminent Domain for Development

Ms. Gelinas points out (as we have) that the Prospect Heights neighborhood wasn’t a slum (i.e. wasn’t “blighted”) and that government intervention to improve the neighborhood was superfluous as private market forces were already taking advantage of the development opportunities there:

In fact, the Prospect Heights neighborhood that Mr. Goldstein and his wife have made their home is hardly a slum. Prospect Heights was thriving before Atlantic Yards construction began. It's a hip neighborhood that's a short hop on the subway from Manhattan.

To meet the needs of in-flowing residents, developers had been converting sturdy old warehouses into condos. One of the newer arrivals, Mr. Goldstein, paid $590,000 in 2003 for his three-bedroom condo in a distinctive, eight-story dry-goods warehouse designed by a renowned Chicago architect and solidly built nearly 80 years before. His neighborhood was home, too, to small-scale industrial firms and a still-operating Prohibition-era bar, as well as to working-class renters.

Unrevealed Ratner Megadevelopment Not a “Public Project”

Ms. Gelinas utilizes developer Bruce Ratner’s immediately infamous November 8, 2009 quote that appeared in a Crain’s interview to remind us that the sort of projects the state would bring into existence don’t even have to involve revealed plans or actually be considered “public projects.” Crain’s reported about asking Mr. Ratner about his mega-project’s designs and said, “Mr. Ratner refuses to discuss what the project will look like, whether or not it will include an office building and even who will design the first residential tower” . . . “He has no intention of sharing the designs for the complex.” And the exact Ratner quote that has now become infamous? Here is Ms. Gelinas slipping in appropriate commentary:

Just last week, Mr. Ratner bristled at requests from a reporter at Crain's New York Business to see his specific building plans. "Why should people get to see plans?" he said. "This isn't a public project." A curious statement, given the state's use of eminent domain on behalf of the project.

Pfizer Shadow on Kelo Case

Ms. Gelinas’s op-ed ran Saturday, November 14th. Only days before, news broke (covered in the New York Times paper edition on Friday) that Pfizer Pharmaceutical has announced that it was leaving the New London, Connecticut even though New London cleared the land Pfizer was vacating via the challenged use of eminent domain in what became the highly controversial Kelo litigation that went to the Supreme Court.

The Kelo case, which said that the federal Constitution doesn’t prohibit the use of eminent domain for economic development, is mentioned by Ms. Gelinas who says, “The decision sparked a national outcry that led more than 40 states to pass restrictions on eminent domain,” She probably did not have time for a last-minute revision to her op-ed to refer to the Pfizer departure. No need: Almost anyone reading Ms. Gelinas’s critique would have been reminded by the concurrently breaking Pfizer departure news that while governments intruding with eminent domain may preferentially anoint one owner to replace another (even a developer to replace other already active developers as at Atlantic Yards), these subsidized rearrangements are more likely to fail economically than what they replace.

Why these forced rearrangements of ownership so often fail is something we will have to return to at length in another post, but it partly has to do with the way that the new owners have less “skin in the game” than the old. Ms. Gelinas deals with one indicator of this diminished investment on the part of the newcomers when she writes about the Atlantic Yards developer’s offers of compensation for the condemned property that are unfairly below market. (Something we have also written about.)

Jane Jacobs?

Suffice it to say that the decisions of the New York voters not to amend the New York Constitution to permit the use of eminent domain for “economic development” was probably a wise one. Perhaps some of those 1967 voters were thinking of what they had read in Jane Jacob’s seminal book, “The Death and Life of Great American Cities” that came out in 1961. It doesn’t seem all that long ago but we wonder if government officials think it has been long enough to forget the lessons we learned from Jacobs.

What the State Constitution Says

The provision of the State of New York Constitution (in the “Bill of Rights”* Article I, Section 7) that prohibits the taking of private property except for public use says now, as it said in 1967:

Private property shall not be taken for public use without just compensation.

(* To read what we wrote about how Alexander Hamilton presumed our New Yorkers liberties would be protected without a state bill of rights, click here.)

(There is a long line of cases that interpret this provision and the similarly worded federal Constitution to mean that private property cannot be taken unless the taking is for public use. In other words, it isn’t enough to pay compensation, whether just or otherwise.)

What the State Constitution Doesn’t Say

In 1967 the above provision of the state Constitution was proposed to be amended to add the words “public purpose” so that it would then have read as follows (emphasis supplied):

Private property shall not be taken or damaged, as such term is defined by law, for public use or purpose without just and timely compensation.

Because of prior case law the exact intent of inserting the words “or purpose” to eliminate the restriction on the use of eminent domain for “economic development” was well-defined. As noted, it was rejected.

Making a Federal Case of the State Constitution?

Is the New York State’s Constitution worded similarly to the federal Constitution and should it be similarly interpreted? The question is important because, as noted, the Kelo decision says that (within the parameters it describes) the federal Constitution does not prohibit the use of eminent domain for “economic development” which is why the fifty states have been addressing the question with their own laws.

Though there are some similarities of wording, there are some very important differences in the wording of the two constitutional provisions and the New York Constitution should be interpreted differently from the federal Constitution. For one thing, even if the wording were the same (as it once was long ago) the difference in the legislative history that includes the New York State voters’ 1967 rejection of “economic development” use, would necessitate diverging interpretations. Beyond this, words have been added to the state Constitution over time that make it clear that the unamended “public use” phrase is to be strictly construed.

Wisdom of 1846

In 1846, without changing the original clause, language was added into the state Constitution specifically for the limited purpose of allowing the opening of private roads across another’s private land if roads were necessary. (Given the premium this rare and specific amendment places on the value of road access, it is interestingly ironic that the Atlantic Yards megadevelopment involves the closing and shutting down of public streets, sidewalks and avenues to convert them into developer-owned property.) This amendment incorporated a procedural protection that no such taking for a private use could not occur unless a “jury of freeholders” (fellow property owners) first determined the “necessity of the road and the amount of all damage to be sustained by the opening thereof.” In contrast, when New York State agencies today try to use eminent domain they declare that they are entitled to avoid any impartially adjudicated fact-finding as to whether their actions make sense, are justifiable and non-pretextual. They also avoid having to do any assessment of the damage they are doing to the community.

Wisdom of 1894

1894 saw a similar specific change, adding additional language to the constitution that permitted construction on the land of others of “drains, ditches and dykes” as drainage for agricultural lands (now also swamps) but only pursuant to the passage of “general laws” together with a belt-and-suspenders prohibition that “no special laws shall be enacted for such purposes.” Ergo, in 1894 New York State citizens amending the state Constitution were on guard against the kind of selective favoritism by which government officials are conspicuously specially benefitting Forest City Ratner, the Atlantic Yards developer.

In Brief, There Are Even More Arguments

It should be said that while we have interjected some of our own editorializing, most of the above analysis is from the legal arguments in the brief for the plaintiffs in the Goldstein v. Pataki case challenging the use of eminent domain which is now before our state’s highest court. The above is but a fraction of the multiple arguments they have presented in making a very good case, all of which bear reading.

Respect the Wisdom of the 1967 Voters and Our State Constitution

Now to reiterate what we have said here. The record shows in 1967 it was the consensus of legal experts that the New York State Constitution did not permit eminent domain takings for “economic development.” The voters then rejected an attempt to change this situation. New York State officials have now attempted to circumvent the voters’ rejection by redefining “blight” as “underdevelopment” which would mean that eminent domain could be used to anoint any developer as the owner of any development the developer wishes to undertake. Finally, we have warned that such economic development projects involving politically connected developers receiving heavy subsidies are bad policy because they are more likely to fail economically than what they replace. That means the voters were wise when they refused to change to the state Constitution to permit abuses like those of the proposed Atlantic Yards, which come dressed in pretextual but unspecified and unevaluated “public benefit.”

About Me

NOTICING NEW YORK & NATIONAL NOTICE are both independent entities managed by Michael D. D. White of Hop-Skip Enterprises. Michael D. D. White is an attorney, urban planner and former government public finance and development official. *** Noticing New York covers New York development and associated politics. National Notice covers national policy and economic issues *** Contact: MichaelDDWhite(at)gmail.com